Daniel Day Lewis – a frustrated accounting client?

Recently I was in a meeting with a CFO of a large privately-owned business with an annual revenue of $120m +. We were chatting about his thoughts regarding the accounting profession. Let’s call this CFO Daniel as in Daniel Day Lewis.

I came to a question of what can the profession do to improve its service to clients.  There was a pause. Daniel paused and then his face started to look redder and redder.

“You know what frustrates me the most James?” he asks rhetorically. “I resent the fact that we hire a firm of accountants/advisors to help us with a particular issue for which they have the right expertise and I end up managing their people for them! I’ve got enough things on my plate without having to set deadlines, follow up and provide guidance when it should be the partners job to take care of their own people. I really get sick of it”

Is Daniel being unrealistic here? What do you think? To my mind I don’t think he is. If you were to hire a building company to build a house for you is it up to you to deal with the various tradespeople directly and make sure the job gets done on time and on budget? Clearly it’s not. The building company would usually have a project manager with whom you can liaise to discuss progress and work through any issues that might come along. Is accounting any different? Or perhaps should accounting be different?

What are some ways in which accountants can offer their clients better service so that CFOs like Daniel don’t get frustrated and tear their hear out! I’ll share some thoughts in the next post.

Thanks,

James E

Are you an accountant who can save the world?

Recently I was at the gym. Don’t  be too impressed. I joined a group about 6 months ago that goes to the gym every Monday & Friday morning and I hate very minute of it! The only reason I go is that I know it is supposed to be doing me some good.

Between some boring weight exercises I chatted with one of my fellow victims at the gym. We both knew each other before the gym and have been friends for a few years. My friend is the Head of Design at a small to medium manufacturing firm which designs, builds and distributes catering equipment. The firm employs around 100 people and has been locally owned & operated for more than 20 years.

I asked my friend how business was going. To cut a long story short, the conversation moved to the impact of the so called “carbon tax” For my readers overseas, the Australian government introduced a tax on carbon producers so as to penalise emissions on 1 July 2012.

My friends firm, as one of the inputs into their productive process, uses refrigeration gas. This gas is one of the long list of items that attracts the new carbon tax. I was amazed to learn that before 1 July this manufacturing firm was paying a wholesale rate of $25 per kilo. Come 1 July the rate for the same gas increased to $160 per kilo. A whopping 640% increase! By the way … this manufacturer doesn’t use a kilo or two of gas a year – they use hundreds of kilos! And this is just one expense item that has been increased due to the carbon tax.

How do business owners and management cope with such a shock? In steps the accountant to the rescue. Given my work with accountants over many, many years I would have thought that  the above example is a golden opportunity to enter the business and use their expertise to help with solutions to manage such impacts on the business.

Numerous examples come to mind of accountants that I have met and worked with who are able to develop innovate ways to run business more efficiently and effectively. Its not just about numbers of course its about the helping the business do better!

Are you an accountant that can save the business world?

See you next post.

All my best,

James E

Are you a “commercial” accountant?

Sorry for not blogging on Friday – no excuses just too many things to do 🙂

A while back I met with a CFO of a privately owned steel fabrication business. Their revenue was over $100m and they employed a workforce of just over 200. To protect the innocent, lets call the CFO Jack as in the great Jack Nicholson. I asked Jack the following question – What is the most important quality or attribute you look for in an accountant?

Integrity, supported by the capability to get the job done. A strong, considered independent viewpoint with the comfort to communicate in a frank and open manner. Having a clear understanding of the genuine incremental value of what can be provided to an organisation. Maintaining a consistent reputation with an acceptance of past failures and an ongoing focus on improving the quality of their offer. An attribute that I would like to see more of is the nurturing of commercial acumen across the range of individuals in the accounting firm and the application of that into the dialogue of business thought and sentiment.

Jack is offering a most interesting insight here: nurturing commercial acumen across all the professionals in the accounting firm, not just the partners or directors. The definition of the word “acumen” is to have the ability to make good judgments and quick decisions, typically in a particular domain. So it follows that commercial acumen refers to an individual’s ability to exercise judgment and make quick decisions in a commercial setting. It is vital that individuals coming into a firm as graduates, and those moving through the ranks, are given the opportunity to develop and grow their abilities to judge a situation and make an informed decision. No number of courses, workshops or reading books can ever take the place of a younger inexperienced accountant being mentored and nurtured by more experienced professionals within the firm. If you’re a partner or a director, a key part of being a leader is to grow those in your team. By doing so, you will help your clients, your firm and yourself. Sounds like a great deal!

Until next time,

James

Are you an accountant that adds value to your clients?

Jim Kondonis is the CFO of Lowes Manhattan – an Australian retailer with over 150 stores with a revenue of over $200m. I asked Jim, Tell me about a time when you received terrible service from an accounting firm. How did it make you feel? What could they have done differently?

I won’t call it a terrible service; I’d rather call this a service that didn’t add value. It was
in a past life of mine. I was working with a Big Four accounting firm and we were using
them as an adviser on a particular acquisition we were working on.
The company that I was involved with was looking at a major acquisition. We decided we’d outsource the due diligence process and obviously involve our accounting partner in the deal. To cut a long story short, it cost us a lot of money for very little value. What happened was that the deal fell over at the 11th hour and we had a big bill to pay.
In fact, the owner of the business I was working with had to negotiate the big bill down to $300,000. At the end of the day, the due diligence process failed because certain parts of the sales contract were not relayed back to the business owner. If they were communicated early on in the piece, we probably would have saved a lot of money, since the deal would have not proceeded, very early in the due diligence process. It came down to the fact that the accounting firm didn’t really understand the operations of the business that they were involved with and didn’t understand the needs of our business. If they understood the needs, then looking at the sale contract, they would have picked up this anomaly in the contract and known for sure that it just wouldn’t have worked for the business.

They didn’t pick up this contract anomaly? It wasn’t discussed at all?

No, until right at the 11th hour when they said, ”Oh, and by the way, in the contract,
there’s this and this, and you can’t use the brand without the permission of the current
owners”. If they really understood how a retail operation worked, then they would
have known that this condition just couldn’t fl y. The whole deal would have been
sidelined in the first couple of weeks. We would have saved a huge amount of time,
effort and expense.

What could they (i.e. the accounting firm) have done differently?

They should have read the sales contract thoroughly. If they didn’t have the skills to
review the contract then they should have said something or recommended another
adviser to us. Their due diligence seemed to focus only on the numbers side and didn’t
take into account the commercial implications of the contract.

What would you have done in the above case?

Bye for now,

James E

How an accounting firm upset Al Pacino (2 of 2)

Following on from the last post, here is the second example of how the incumbent accounting firm upset “Al” the CFO of a major law firm (as if the first example wasn’t enough!)

Once the tender was announced, and the accounting firms invited to prepare the documentation and presentations ready for the selection panel, Al noticed that the incumbent firm didn’t show much energy or enthusiasm for the process. When they came around to actually present to the panel they came up with a standard, average run-of-the-mill pitch. Nothing really stood out. Al got the impression that they had already given up.

Ironically, in spite of the weakening relationship over the last couple of years, the incumbent firm still had the advantage of knowing practically everything about the law firm since they had been the auditor/adviser for the several past years. They knew things about the law firm that none of the other 5 firms could possibly know.

I get the feeling from Al that if the incumbent firm pulled something put of the bag and had directly addressed the problems with the relationship they would have been in there with a much better chance. Also I was surprised to learn that the incumbent accountants had helped (and were quite successful) in referring clients to the law firm. In spite of helping the law firm grow their fee base it wasn’t enough to help the incumbent accountants keep their business. They needed to do their core job better. Just goes to show – accounting firms need to do much, more more to keep their clients happy. Being a “standard accounting practice” is simply not enough these days.

The other lesson here is to not give up. There is always scope and room to reinvent & strengthen the relationship you & your practice has with its clients no matter how difficult or strained.

In summary, the law firm they went with a big 4 accounting firm and the incumbent lost between $100 to $150k of ongoing work a year – not including special advisory projects. Quite a price to pay!

Catch you next post,

James E

How an accounting firm upset Al Pacino (1 of 2)

The other day I had a coffee with a friend of mine who happens to be a CFO of a big law firm in Australia. As always to protect the innocent let’s call my friend Al as in Al Pacino.

Al had been unhappy with the accounting firm he was using for the last couple of years. So to bring the matter to a head he arranged a tender and invited 5 major accounting firms to bid and to keep things fair he invited the incumbent to also lodge a bid.

After a few weeks, all submissions were made and the “beauty parade” commenced. Of the six firms tendering 2 were stand outs, 2 were average and 2, as Al succinctly put it, “were rubbish”. Their old accounting firm was one of the bottom 2.

I asked Al why the incumbent firm had rated so poorly; was their a bias in his business that they had to change accounting firms no matter what? Al had said no – the selection panel was more than willing to give them a fair go. However, in the period leading up to the tender and during the process the incumbent firm did themselves no favours. Al shared the following two examples.

Example1:

Not long before the tender was announced Al got a phone call from a senior partner in the accounting firm. The partner told Al that another partner who was working on an important piece of advisory work for Al was leaving their firm to join a competitor. Al thought to himself well this isn’t good news but at least we’ll have a month or two to transition to another partner so the work can continue. Al almost exploded in anger when the accounting partner told him, ” by the way … today is his last day” Al was furious. He since found out that the partner doing the advisory work had resigned 3 months earlier and here he was being told that today was his last day! Al considered the height of unprofessionalism and an incredible lack of transparency. Not a good look to say he least.

Tune into the next post to read example 2

James E

How to get clients (2 of 4)

Let me say right up front – I’m not an accountant. My professional training is in the areas of economics, education & management. That being said I’ve been a keen observer of individual professional accountants, accounting firms (big and small) and their clients for many, many years.

The best way to get more clients is to think like a client. If I put on my “client hat” then I want 3 “things” from my accountant. Today’s post will talk about 1 of these, the next 2 posts will talk about the remaining things not just that I want, but the majority of business clients and owners out there want and need.

Leaving to one side the legal/regulatory need for businesses to comply – e.g. tax returns, audits and the like clients want their accountants to help them MAKE MONEY.

It is well understood that accountants, throughout the developed world, (usually) enjoy having a strong & trusted relationship with their business clients. Consequently, it will be safe to assume that the accountant has an intimate knowledge of the internal workings of their clients. In fact I have friends in the accounting profession that know their client’s businesses better than the owners of the business!

What a wonderful opportunity then to come up with ideas that can help your business clients identify new markets, explore different product or service development, uncover ways to more efficiently deliver outcomes to their customers or any one of dozens of ways to come up with avenues to help your client make more money.

Who better to help businesses come up with ways to make more money than you?

See you next post,

James E.

 

 

 

 

Please … give it to me straight

We have all heard the old saying – “give it to me straight.”

Usually in the movies someone is sitting in a doctors office on a chair on one side of the desk with the doctor sitting on the other side.  The doctor looks worried, is fidgety and is searching for the right words to use. The patient (usually a man) calmly asks the doctor to “give it to me straight.”

The doctor replies, “Marshall … I have good news and bad news. Which would you like first?”

Marshall says, “Give me the good news Doc”

Doctor replies, “You have one week to live”

“What? One week to live! That’s the good news? What on earth is the bad news?, Marshall shouts out.

The Doctor sheepishly admits, “The bad news is … I meant to tell you the good news last week”

Funny story, but unfortunately many clients of accountants, are victims of not being told the bad news early enough.

A good friend of mine is a management consultant.  He is highly skilled and experienced and earns a very good living. Being self-employed he has to fulfill the usual compliance requirements for operating a small business. As you know, in Australia one of these requirements is to lodge a quarterly business activity statement (BAS). Along with lodging the documentation there is usually an amount of tax payable.

For some strange reason my friend hadn’t lodged his BAS’s for 12 consecutive quarters. For some strange reason his accountant didn’t remind or raise the issue with my friend not until one day four years later he had a difficult chat with his client. Needless to sy it was not a nice discussion – the outcome of which was a bunch of fines, interest on what was owing, and the balance of the tax payable – a truckload of money and a blemished record with the Tax Office.

A question for you … “Who is at fault … the client or the accountant? Legally its the client. Morally it maybe the accountant.

What do you think?

See you next post.

James E.

Never judge a book by it’s cover

Cliche’s are cliches because they are often true. This is certainly the case with the old saying “you can’t judge a book by it’s cover”

Many years ago I knew about a local businessman who over the course of 30+ years had built up a very successful waste management business specialising in sewerage and grease traps. To protect the innocent we will give this chap a code name – lets call him Trevor.

Trevor, with complete respect, looked every bit the quinessential garbage man. He was in his late fifties, had a pot belly, wore a blue singlet, shorts and work boots. Given the type of work Trevor did every day he looked dirty and had a certain aroma around him. Trevor didn’t care – he was a successful guy building a business that had made him wealthy. He just didn’t look or smell successful!

One day, Trevor, driving through the Sydney CBD in the old beat up Dodge truck he usually drove, stopped outside a Rolls Royce dealership. Somehow he managed to get a parking right in front of the show room so the sales and support staff inside saw exactly what Trevor was driving and as he walked through the big glass doors, what he looked like.

Trevor walked up to one of the cars on the floor, opened the door and stuck his head in to have a look. He then closed the door, took a couple of  paces towards the front of the car and kicked the drivers-side tyre and called out to the small group of sales people gathered on the other side of the showroom and said, “Hey … how much do you want for this piece of sh**t?!”

One of the senior managers quickly walked over and said to Trevor, “Sir, I think you are in the wrong place. Why don’t you leave?” I wasn’t there of course but I can just imagine the snooty tone of the request.

“No mate, mate … you’ve got it wrong. I want to buy one of these cars. How much are they and do you have them in stock or do I have to wait?”

“Sir, you are in the wrong place. Please leave.” came the reply.

Trevor tried a couple of more times to set the manager straight, but was told in no uncertain terms that the police would be called immediately if he didn’t leave.

With a few well placed expletives, Trevor left … very angry and embarrassed.

Fast forward 4 weeks …

Trevor, still wearing his usual work gear (although it was nice and clean) drove past the Rolls Royce dealership, parked his new car, close to the same spot he had parked a month earlier, walked up to the showroom and called out seeing the guy who had asked him to leave.

“Mate … you should have listened to me and not make f***ing stupid assumptions. You could have got a nice commission cheque from your boss. Mate … you are a big d**kh**d!”

The manager, speechless, watched Trevor leave the showroom, go back to his car, jump in and drive off. Trevor had changed his old Dodge ute for a
brand new top-of-the-range Bentley that he bought and had freighted from a dealer in Melbourne.

The bottom line of this story is to never assume the quality of a prospective client until you ask some questions and get to know them!

See you next post,

James E.

A frustrated CFO named Jackie

The other day I was in a meeting with a CFO of a large privately owned business with an annual revenue of $120m +. We were chatting about his thoughts regarding the accounting profession. Let’s call this CFO Jackie as in Jackie Chan.

I came to a question of what can the profession do to improve its service to clients.  There was a pause. Jackie paused and then his face started to look redder and redder.

“You know what frustrates me the most James?” he asks rhetorically. “I resent the fact that we hire a firm of accountants/advisors to help us with a particular issue for which they have the right expertise and I end up managing their people for them! I’ve got enough things on my plate without having to set deadlines, follow up and provide guidance when it should be the partners job to take care of their own people. I really get sick of it”

Is Jackie being unrealistic here? What do you think? To my mind I don’t think he is. If you were to hire a building company to build a house for you is it up to you to deal with the various tradespeople directly and make sure the job gets done on time and on budget? Clearly it’s not. The building company would usually have a project manager with whom you can liaise to discuss progress and work through any issues that might come along. Is accounting any different? Or perhaps should accounting be different?

What are some ways in which accountants can offer their clients better service so that CFOs like Jackie don’t get frustrated and tear their hear out! I’ll share some thoughts in the next post.

Thanks,

James E